WESTFIELD – The City Council could give final approval to an order authorizing the City Treasurer to apply to the state Finance Oversight Board for permission to issue city bonds through the state Qualified Bond program.
The City Council approved the first reading of the order at its Nov. 21 session and is slated to consider the second reading and final passage this Thursday, Dec. 5th.
Mayor Daniel M. Knapik submitted an order to the City Council at the Nov. 7 meeting that will enable the city to participate in the State Qualified Bond program to obtain more competitive and lower bond interest rates. The language of the order authorizes the City Treasurer to apply to the Commonwealth of Massachusetts Finance Oversight Board for permission to issue bonds of the city as state qualified bonds within the meaning of Massachusetts General Law Chapter 44.
The order came out of the Council’s Legislative & Ordinance Committee with a 2-0 positive recommendation and was referred to the L&O by the Finance Committee with a 3-0 positive recommendation.
The Finance Committee did raise a number of concerns about the state bond program bond debt paid by the state, which then deducts the payments from the city’s “cherry sheet” of state aid.
Several members of the Finance Committee said they were concerned about how the automatic state aid deductions will be reflected on the city’s books and how that process will affect the city’s debt capacity.
Finance member David A. Flaherty said he is concerned that the state bond debt will not be transparent on the city’s books if those bond payments “are charged back to the city’s cherry sheet.”
Finance Chairman Richard E. Onofrey Jr. shared that concern, stating that the cherry sheet payments distort the city’s true debt status.
“The city debt will be artificially low,” Onofrey said. “I would like to show those cherry sheet deductions as debt obligation.”
The Finance Committee, under former Finance Chairman John Liptak, adopted a policy of maintaining annual debt payments of between $6 and $8 million. As old debt is retired, new debt is incurred to maintain the debt capacity from year to year.
The concern of the current Finance Committee is that the cherry sheet deductions are not clearly reflected as city debt and that debt funding will be diverted to other municipal operating expenditures and debt capacity eroded.
